Brick-and-mortar store owners have something that online retailers simply don’t (at least not yet) – a smiling, helpful shop assistant to guide shoppers through the aisles in their quest to fill their carts with intended (and, frequently, unintended) goodies. You see, once shop owners have buyers in their store, they want them to buy as much as possible without having to get them to come in again. Essentially, they’re increasing their Average Order Value (AOV), albeit more simplistically.
Online store owners need to rely on other means to increase AOV, ways that lack a friendly face and human connection. Luckily, with data and technology on your side, there are many other easy ways to increase AOV for your Shopify store.
What is Average Order Value?
Average Order Value (AOV) is the average monetary total of every order placed in your online store and one of the most important metrics for e-commerce sellers to measure if they want to become profitable.
How do you calculate AOV?
AOV is calculated by dividing your total revenue by your number of orders:
For example, if you have a total revenue over a selected period of time of $10,000 and you have 500 orders during that same period, your e-commerce AOV is $20.
How does Shopify calculate Average Order Value
If only the numbers were that simple to calculate. In reality, you need to pull all the data together before you can even do that straightforward calculation, and that is the biggest challenge of all.
Thankfully, e-commerce platforms such as Shopify come equipped with add-ons and apps that can automatically pull all this data together for you and help you calculate your AOV.
BeProfit – Profit Tracker is a Shopify profit calculator and reporting app that tracks, measures and presents your store’s key actionable metrics, including AOV, in one intuitive dashboard, making it easy to pinpoint how to increase your AOV.
Why Average Order Value is important
When it comes to profitability optimization, simply increasing revenue isn’t enough – we also need to take expenses into account, and many of these expenses are variable in that they relate directly to the sale itself. Increasing AOV helps you maximize your profits, as you get the biggest bang for your customer acquisition buck, the optimal return on investment. If you can get the most revenue possible from a customer in a single order, then you’re on the path to profitability.
By selling more products in a single order, you manage to avoid incurring additional variable costs for making that sale, specifically customer acquisition costs, as the customer is already at the point of purchase or well into the sales funnel.
Measuring your average order value can help you make crucial data-driven business decisions including:
- How much to invest in marketing and whether your strategies are working
- How to price products
- Strategies to help increase AOV e.g. price point discounts, add-ons, shipping benefits, and more
- Whether the strategies you already employ are working or not
How to increase AOV
Upsell/cross-sell related products
Since your aim is to increase the dollar value of customer orders, you’ll want to try to get your customers to buy as many products as possible in one order. An effective way to do this is to upsell and/or cross-sell.
Upselling entails upgrading or selling a more expensive product to your customers than they were intending to buy. For example, if you sell mobile phones, you could entice shoppers to purchase a more expensive model instead of the phone they were searching for. You could do this by showing product recommendations and highlighting best-selling products with customer reviews.
Cross-selling involves selling complementary products. Using the mobile phone example, if you encourage a customer to buy phone accessories such as a screen protector, phone case, and so on, with their phone purchase, that is cross-selling.
Sell bundles or packages
If you want to get customers to buy more in one go, offer product bundles! A bundle is when you sell related items together at a discounted price. For example:
Just say you sell Marvel superhero toys at these prices:
Instead of selling individual items, you could offer your customers a Spiderman toy bundle, whereby they get a discount if they buy all three products together in one order, thereby increasing your AOV:
You get a higher AOV and the customer gets their discount – a win-win situation. Even though you’re selling the items at a total of $10 less than if they were bought individually, you’re saving on customer acquisition costs as you’re selling to a customer that is already well into the sales funnel.
Give your customer points for dollars spent and you’ll see your AOV go right up. If customers know that they’re earning points the more they spend, the more they’ll buy. These points can then be redeemed at the next purchase.
Free shipping incentives if a certain dollar threshold is met
Nothing quite like free shipping! Even though free or low-cost shipping has become almost a staple in online selling, it’s a tasty carrot to dangle when trying to increase AOV. You simply need to incentivize customers to reach a certain minimum order value to qualify for free shipping, for example, if your current AOV is $30 and you want to increase it by 30% to $39, you can offer free shipping for all orders $40 and up.
Offering a time-sensitive sales promotion is an excellent way to drive customers to fill their carts to the brim. No-one wants to feel like they’re missing out on a good deal so this sense of urgency can help increase your AOV. Black Friday and Cyber Monday sales are the perfect examples of time-sensitive sales that increase AOV. FOMO (fear-of-missing-out) is a massive driver of consumer behavior!
Gift cards help to increase Average Order Value as you can incentive customers to spend more per order to earn a gift card or voucher. For example, if your AOV is $25, you can give customers a $5 gift card if they spend $40 on an order.
Did we say easy?
We sure did! With an e-commerce platform, increasing AOV with one, more (or better yet), all of these ways is as easy as pie (app-le pie to be specific). In the Shopify app store, you can download many apps to improve your store’s functionality and automate all of these AOV-increasing tactics.